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> Posted by Center Staff
It’s common knowledge in the United States that the student loan situation is bad and getting worse, but what are the actual statistics and how severe is this trend? Like other kinds of debt, student debt has innumerable implications for young borrowers, as well as for the country’s recovering economy.
A new report from the New America Foundation inspects undergraduate student loan debt data from the past ten years, compiling borrower rates and amounts, in aggregate and by institution and degree type. The report, The Student Debt Review, draws from the National Postsecondary Student Aid Studies, a national survey series of student financial aid. Here are some of the report’s main findings:
- More students are indebted. Across all institution and degree types, the percentage of graduates with debt increased from 54 percent in 2004 to 62 percent in 2012. In 2004 there were 1.6 million graduates with debt. By 2012 there were 2.4 million.
- They owe more. Total student loan debt increased by an average of $3,300 between 2008 and 2012 after a period of four years in which it changed only marginally (2004-2008).
- For-profit colleges are a sore spot. Student debt is increasing especially quickly for bachelor’s degree recipients at private for-profit colleges, who now graduate with an average debt of $40,000 and pay $153 more each month than those graduating with bachelor’s degrees at public colleges. A very high proportion of the bachelor’s degree graduates at private for-profit colleges have borrowed (87 percent), compared to public colleges (64 percent).
> Posted by Center Staff
Last week Palestinian government officials announced plans to create a national financial inclusion strategy, an initiative that would put it on a short list of two countries in the Middle East and North Africa (MENA) region that have nationwide, government-led inclusion plans (Morocco being the other).
The Palestine Monetary Authority (PMA) and the Palestine Capital Markets Authority (PCMA), the country’s central bank and a national regulating body will co-lead the project along with support from the Alliance for Financial Inclusion (AFI) and other public and private groups.
The policies and guidelines of the strategy will aim to facilitate greater access, improve awareness and financial education, and reinforce client protection. An area inviting particular attention is access to credit, which is low for both individuals and SMSEs. The strategy will build on inclusion principles endorsed by the G20, World Bank, AFI, and the OECD Principles on National Strategy for Financial Education.
> Posted by Jeffrey Riecke, Communications Associate, CFI
Corporate social responsibility or profitability? Why are more and more financial services providers expanding their focus to include banking the unbanked? After all, many of those without formal financial services don’t have incomes to support big or frequently-used products, and their circumstances often present challenges for access, risk, and other services dimensions.
Industry activity in recent years, organizational objectives aside, has demonstrated the potential for sustainable and profitable investment in financial inclusion. Advancements in product design, technology, and risk management, and trends in demographics and incomes are making it increasingly possible for commercial financial services providers, as well as stakeholders in adjacent industries like telcos and technology providers, to support inclusion.
In the following video, global leaders discuss how financial inclusion is not only good for individuals, markets, and countries, but also good business.
> Posted by Sonja E. Kelly, Fellow, CFI
The U.S. Congress has recently been involved in debate on immigration, a theme also explored in President Obama’s State of the Union Address last week. Such conversations have led me to wonder… what does financial inclusion mean for people who are living outside of their home country?
There has been a marked increase in countries that have released definitions of financial inclusion, national strategies for financial inclusion, and regulations that support financial inclusion. The focus of these efforts is in part determined by how countries define the target population for financial inclusion. Often, financial inclusion is not for everyone.
At the Center for Financial Inclusion, our definition specifies that financial services are “for all who can use them.” For us, age, disability, gender, or citizen status should not keep people from formal financial services.
In the implementation of financial inclusion policy, regulation, and strategy, however, there are legal and security-based concerns affecting why our definition of financial inclusion “for all who can use financial services” isn’t reflected in every definition of financial inclusion. The OECD and the EU, for example, are very clear that financial inclusion is for citizens only. Other countries around the world similarly adopt this definition. Read the rest of this entry »
> Posted by Danielle Piskadlo, Senior Program Specialist, CFI
The Investing in Inclusive Finance program at the Center for Financial Inclusion at Accion explores the practices of investors in inclusive finance. Across areas including risk, governance, stakeholder alignment, and fund management, this blog series highlights what’s being done to help the industry better utilize private capital to develop financial institutions that incorporate social aims.
In 2003, the Council of Microfinance Equity Funds (CMEF) was formed by a handful of equity investors in microfinance with the goal of sharing, developing, and disseminating industry best practices in equity investing.
I recently had the pleasure of catching up with Jim Kaddaras, who was Vice President of Special Projects at Accion from 2001-2003. He was instrumental in launching the CMEF in 2003, and also led the charge on the creation of Accion Investments. Jim is now a Partner at Developing World Markets, and is still a Council member.
Q: What did the landscape of microfinance equity investing look like in 2003?
Jim Kaddaras: It wasn’t much of a landscape – it was more of a scatter shot.
Accion owned stakes in some of their Latin American affiliates and Accion Investments was just launching in 2003. Procredit was a player (they were called IPC back then and their banks had separate names). FINCA had some equity investments and ShoreBank had a smattering of equity holdings.
ProFund had been around since 1995 as the first investment company focused on microfinance equity but it was winding up when the Council started. Africap was just starting, based on the ProFund model. Various other Council members, plus the development finance institutions (DFIs) and several non-profit networks, held a handful of equity investments.
Q: What was the goal of the Council when it was formed?
JK: We felt that by gathering people who had been making equity investments in a one-off way, we could help to develop and disseminate best practices in the field.
> Posted by Mary Hansen, Organizational Development and Training Associate, Accion
842 million people struggle through the hunger games yearly. The games begin as food and money run low sometime before harvest and last until the first ripe crops. This is better known as los meses flacos, the thin months, in Latin America. Or as I knew it in East Africa, wanjala in Swahili and nyengo yonjala in Chichewa (the hunger season). These recurring hunger games are not state sponsored and the participants do not fight each other to the death, but they do fight individuals, families, or communities to survive. Every day, 25,000 people around the world die from hunger-related causes, including 16,000 children. That’s one child every five seconds.
The regions deeply affected by hunger depend heavily on smallholder farming. Around 75 percent of the world’s poor are smallholder farmers. Half of the world’s undernourished people, including three-quarters of Africa’s malnourished children and the majority of those living in absolute poverty live on small farms.
Personally, I struggle with budgeting when paid twice a month. When I was in the Peace Corps in Malawi and was paid monthly, I struggled even more. Yet, smallholder farmers often receive payment only during harvest, or twice a year. I still do not fully understand how families survive with this income structure, even though I lived in a rural town in Malawi for two years. Yet, this is the reality for many of the 2.5 billion people that depend on smallholder agriculture for their livelihoods.
> Posted by Center Staff
Expanding financial inclusion to the 2.5 billion unbanked individuals around the world is essential, but why does it matter, and is it possible in the next six years?
In recent years, the inclusion movement has achieved critical support and rapid progress. Last year universal financial access by 2020 was endorsed by World Bank President Jim Kim. Technology-enabled business models are catalyzing outreach, building on infrastructure like the mobile phones now accessible to six of the world’s seven billion people.
In the following video, global financial inclusion leaders explore the questions of whether financial inclusion is possible by 2020, and why we should work towards that goal.
> Posted by Laura Galindo and Alexandra Rizzi, Senior Associate and Deputy Director, the Smart Campaign
A few days ago a post on this blog detailed debt collections practices in the United States. The Smart Campaign, led by Jami Solli of Consumers International, is working to shed light on provider practices in microfinance through exploratory research in Peru, India, and Uganda.
Once a client becomes seriously delinquent and moves into default, the possibilities for serious consequences for the client arise. Yet little is known about how microfinance institutions treat clients at these later stages. What alternatives do providers offer to clients who are in protracted arrears? How are clients treated when they are defaulting on multiple loans? What do clients experience during this difficult and stressful stage? And after the default, are client debt obligations resolved? Is there a concerted effort to rehabilitate or re-include defaulters?
In September, the Smart Campaign kicked off a research project to explore what happens to clients who default. The project focuses on how microfinance practitioners treat defaulting clients. It is scanning for best practices around the world – like debt mediation projects in Europe and middle-income countries – and examining practices in detail through interviews with practitioners and regulators in Peru, India, and Uganda. Interviews were also conducted with credit bureaus, debt collections agencies, consumer advocacy/protection groups, and researchers specialized in those markets. These countries were chosen, in part, because of their variation in credit bureau infrastructure and the hypothesis that this would have significant impact on provider practices.
> Posted by Pina D’Intino, Senior Manager, Scotiabank
The Financial Inclusion 2020 campaign at the Center for Financial Inclusion at Accion is building a movement toward full financial inclusion by 2020. Accordingly, this blog series will spotlight financial inclusion efforts around the globe, share insights coming out of the creation of a roadmap to full financial inclusion, and highlight findings from research on the “invisible market.”
In 1998, I unexpectedly lost my sight as a result of a medical complication. One of the first things that struck me was the impact this disability had on my day-to-day living, including my ability to independently and confidentially access and conduct my banking. Thankfully, I was still employed and could continue to save and invest towards the purchase of a home and ultimately plan for retirement. However, this proved to be much more difficult than I imagined.
Today, 15 years later, and after acquiring sufficient skills to use a screen reader, I am able to access my retail accounts for basic banking but am still unable to effectively use tools with my screen reader that will allow me to estimate the cost of purchasing a home or what my mortgage would be, nor am I able to independently use simple investment or trade tools that would allow my savings to grow. All this despite the evolving technical enablers and my digital literacy increasing.
As more and more branches are moving towards self-service tools, it has become harder to meet in person with a financial advisor. And yet, I cannot independently access information that would allow me to make informed decisions, cannot independently conduct or monitor my investments, and need someone to read to me the complex and lengthy application forms that I need to complete. Furthermore, if I go to a branch with someone else, at times, the staff will not allow me to include the person in the conversation unless a proxy or power of attorney is on file for them to disclose any personal information. At other times, they will speak to the person who comes with me, rather than speaking to me directly. Read the rest of this entry »
> Posted by Jeffrey Riecke, Communications Assistant, CFI
Thirty million Americans are currently being pursued by debt collectors. During 2012, the Federal Trade Commission (FTC) received 180,000 complaints about the practices of these companies – a 13 percent increase over 2000 levels and more FTC complaints than from any other industry. Troublesome practices seem to only be limited by the imagination, but some of the more reported-on ones are incessant calling at all hours and issuing unsubstantiated, misleading threats. Today the U.S. debt collection industry stands at over 4,500 companies and $12 billion.
To make matters worse, many of those being pursued don’t even have the debt in question. About one-quarter of the collection-related complaints the Consumer Financial Protection Bureau (CFPB) received last year were from individuals who were being wrongly pursued.
Debt collection happens, with some variation, in one of three ways: lenders carry out the collection in-house; third-party companies are hired and paid to complete the collection; or third-party companies buy a lender’s debt and independently complete the collection. In the latter case, collection companies buy individual’s debts from lenders for as low as a few cents for each dollar of debt and in return they receive a spreadsheet with basic information like names, phone numbers, and debt amounts. Collectors pocket the difference between what they paid to the lenders and the total they collect. It’s not uncommon for this spreadsheet information, intentionally or not, to be inaccurate or faulty. And even when a person is wrongly pursued, the consequences can be serious.
A popular debt collections practice brought to public attention in recent years thanks to legal suits centers on collectors taking debtors to court without their awareness (giving new meaning to the phrase blind judgment). Collections agents fail to serve a debtor a notice of complaint, produce a false affidavit claiming the individual has been properly served, and then proceed with a court hearing. The defendant, of course, does not attend, and so most often the debt collector wins the case and a default judgment is issued. (More than 95 percent of credit card lawsuits end in a default judgment, an automatic win for the collector or lender.) Such rulings could include the freezing of bank accounts, garnishing of wages, and they are very likely to reduce credit scores.